Hotel industry tax structure

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There is a Hotel In mumbai. The tax structure of the hotel are as follow

Billing are as follow

   This is a Room Revenue   
     
   Food Items        22,000.00
   Beverages        18,000.00
          40,000.00
 Add :   Service Charge @ 5% Levied by Hotel Policy (Whole amt of Service Charge distributed to employees          2,000.00
   
   
   Net / Basic Amt        42,000.00
 Add :   VAT @ 12.5%          5,250.00
 Add :   Service Tax @ 7.416 %          3,116.40
   Final Bill        50,366.40

My question is that here VAT and Service tax is levied on 5% Service Charge Amt, is it correct or wrong ???????

Replies (1)

VAT is not chargeable on service charges but service tax is applicable on service charge. Further, service tax rate applicable is 40% of 12.36% but in the above bill service tax is charged at 60% of 12.36%.

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